The Cayman Islands has traditionally been the domicile of choice for private investment funds managed by Asian managers. It is common for a Cayman Islands investment fund to appoint a manager incorporated in the Cayman Islands (Cayman Manager), which in turn delegates investment management to a Hong Kong type 9 (asset management) licenced fund manager. The Cayman Islands has recently enacted a series of important changes which impact Cayman Managers. If you have a Cayman Manager in your group, you should take steps to ensure compliance with these requirements.
- Amendments to the Securities Investment Business Law (SIBL) – the majority of Cayman Managers are currently registered with the Cayman Islands Monetary Authority (CIMA) as an “Excluded Person” under SIBL. With immediate effect, it is no longer possible to register a new entity as an “Excluded Person” with CIMA. Instead, relevant entities will need to register as a “Registered Person” and obtain CIMA’s formal approval before commencing any securities investment business activities.
For existing Excluded Persons, re-registration with CIMA will be required by 15 January 2020.
- Anti-money laundering / countering the financing of terrorism (AML/CFT) reporting – CIMA requires the filing of two new AML/CFT forms containing detailed information relating to a Cayman Manager’s activities and its AML programme such as details on board oversight, AML policies and procedures, AML training and risk controls. Filing of the AML/CFT forms will be a prerequisite for re-registration as a “Registered Person” under SIBL.
The filing deadline is on or before 15 August 2019.
- Economic substance law (ESL) – from 1 January 2019, the ESL requires in-scope entities, including Cayman Managers but excluding investment funds, that carry out specific activities such as fund management business to demonstrate economic substance in the Cayman Islands.
The applicability of the economic substance requirement will commence from the date a Cayman Manager registers or re-registers as a “Registered Person” with CIMA.